Appeal details
Counselvise Citation
[2019] 117 COUNSELVISE.COM (IT) 4560 (ITAT-CHENNAI)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
6 month(s) 22 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
29-05-2019
Appeal Filed By
Assessee
Order Result
Allowed
Bench Allotted
A
Assessment Year
2012-2013
Appeal Filed On
07-11-2018
Judgement Text
, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI . . . , . !' , $ % BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ./ ITA NO.3038/CHNY/2018 ' (' / ASSESSMENT YEAR : 2012-13 M/S SOUTHERN SCRIBE INSTRUMENTS PVT. LTD. , NEW NO.398, OLD NO.766, POONAMALLEE HIGH ROAD, KILPAUK, CHENNAI - 600 010. PAN : AANCS 9579 G V. THE DEPUTY COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE 6(2), CHENNAI - 600 034. (*+/ APPELLANT) (,-*+/ RESPONDENT) *+ . / / APPELLANT BY : SH. A.S. SRIRAMAN, ADVOCATE ,-*+ . / / RESPONDENT BY : SHRI AR.V. SREENIVASAN, JCIT 0 . 1$ / DATE OF HEARING : 06.05.2019 2!( . 1$ / DATE OF PRONOUNCEMENT : 29.05.2019 / O R D E R PER N.R.S. GANESAN, JUDICIAL MEMBER : THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST T HE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) -16, CHENN AI, DATED 18.09.2018 AND PERTAINS TO ASSESSMENT YEAR 2012-13. 2 I.T.A. NO.3038/CHNY/18 2. SH. A.S. SRIRAMAN, THE LD.COUNSEL FOR THE ASSESS EE, SUBMITTED THAT THE ONLY ISSUE ARISES FOR CONSIDERAT ION IS ADDITION MADE BY THE ASSESSING OFFICER UNDER SECTION 2(22)(E ) OF THE INCOME-TAX ACT, 1961 (IN SHORT 'THE ACT'). THE LD. COUNSEL SUBMITTED THAT THAT THE ASSESSING OFFICER MADE ADDITION OF 74 LAKHS BEING THE AMOUNT RECEIVED FROM M/S SOUTHER CHROMATICS PVT. LT D. AS DEEMED DIVIDEND UNDER SECTION 2(22)(E) OF THE ACT. ACCORD ING TO THE LD. COUNSEL, THE LOAN RECEIVED BY THE ASSESSEE-COMPANY FROM M/S SOUTHERN CHROMATICS PVT. LTD. CANNOT BE CONSTRUED T O BE DEEMED DIVIDEND IN THE HANDS OF THE ASSESSEE. ACCORDING T O THE LD. COUNSEL, THE ASSESSEE-COMPANY IS NOT A REGISTERED S HAREHOLDER OF M/S SOUTHERN CHROMATICS PVT. LTD. ON A QUERY FROM THE BENCH WHO ARE THE SHAREHOLDERS IN THE ASSESSEE-COMPANY AND IN M/S SOUTHERN CHROMATICS PVT. LTD.? THE LD.COUNSEL COULD NOT CLA RIFY THE DETAILS OF SHAREHOLDING PATTERN. HOWEVER, ACCORDING TO THE LD . COUNSEL, THE CIT(APPEALS) IN THE IMPUGNED ORDER REFERRED THAT ON E SHRI JACOB IS HOLDING SHARES IN THE ASSESSEE-COMPANY AS WELL AS I N M/S SOUTHERN CHROMATICS PVT. LTD. 3. ON THE CONTRARY, SHRI AR.V. SREENIVASAN, THE LD. DEPARTMENTAL REPRESENTATIVE, SUBMITTED THAT M/S SOU THERN 3 I.T.A. NO.3038/CHNY/18 CHROMATICS PVT. LTD. ADVANCED LOAN TO THE ASSESSEE- COMPANY. ACCORDING TO THE LD. D.R., THE VERY OBJECT OF ENACT ING SECTION 2(22)(E) OF THE ACT IS TO PREVENT THE COMPANIES IN ARRANGING THE AFFAIRS IN SUCH A MANNER BY ADVANCING MONEY TO THE SHAREHOLDERS AND AVOID PAYMENT OF TAXES. ACCORDING TO THE LD. D .R., SHRI K. JACOB, SMT. ANNIE JACOB AND SHRI ANISH JACOB ARE HO LDING AGGREGATE SHARES OF MORE THAN 20% IN M/S SOUTHERN C HROMATICS PVT. LTD. SINCE THE LENDER COMPANY M/S SOUTHERN CH ROMATICS PVT. LTD. HAS NOT DEDUCTED ANY TAX, THE RECIPIENT COMPAN Y IS LIABLE FOR TAXATION. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. IT IS NOT IN DISPUTE THAT THE ASSESSEE-COMPANY RECEIVED LOAN / A DVANCE OF 74 LAKHS FROM M/S SOUTHERN CHROMATICS PVT. LTD. WE HA VE CAREFULLY GONE THROUGH THE PROVISIONS OF SECTION 2(22)(E) OF THE ACT WHICH READS AS FOLLOWS:- 2(22) DIVIDEND INCLUDES (A) . . . (B) .. .. (C) . (D) .. . 4 I.T.A. NO.3038/CHNY/18 (E) ANY PAYMENT BY A COMPANY, NOT BEING A COMPANY I N WHICH THE PUBLIC ARE SUBSTANTIALLY INTERESTED, OF ANY SUM (WHETHER AS REPRESENTING A PART OF THE ASSETS OF THE COMPANY OR OTHERWISE) MADE AFTER THE 31ST DAY OF MAY, 1987, BY WAY OF ADVANCE OR LOAN TO A SHAREHOLDER, BEING A PERSON WH O IS THE BENEFICIAL OWNER OF SHARES (NOT BEING SHARES ENTITL ED TO A FIXED RATE OF DIVIDEND WHETHER WITH OR WITHOUT A RIG HT TO PARTICIPATE IN PROFITS) HOLDING NOT LESS THAN TEN P ER CENT. OF THE VOTING POWER, OR TO ANY CONCERN IN WHICH SUCH SHAREHOLDER IS A MEMBER OR A PARTNER AND IN WHICH H E HAS A SUBSTANTIAL INTEREST (HEREAFTER IN THIS CLAUSE REFE RRED TO AS THE SAID CONCERN) OR ANY PAYMENT BY ANY SUCH COMPAN Y ON BEHALF, OR FOR THE INDIVIDUAL BENEFIT, OF ANY SUCH SHAREHOLDER, TO THE EXTENT TO WHICH THE COMPANY IN E ITHER CASE POSSESSES ACCUMULATED PROFITS ; BUT DIVIDEND DOES NOT INCLUDE (I) A DISTRIBUTION MADE IN ACCORDANCE WITH SUB-CLAU SE (C) OR SUB-CLAUSE (D) IN RESPECT OF ANY SHARE ISSUED FOR F ULL CASH CONSIDERATION, WHERE THE HOLDER OF THE SHARE IS NOT ENTITLED IN THE EVENT OF LIQUIDATION TO PARTICIPATE IN THE S URPLUS ASSETS ; (IA) A DISTRIBUTION MADE IN ACCORDANCE WITH SUB-CLA USE (C) OR SUB-CLAUSE (D) IN SO FAR AS SUCH DISTRIBUTION IS AT TRIBUTABLE TO THE CAPITALISED PROFITS OF THE COMPANY REPRESENT ING BONUS SHARES ALLOTTED TO ITS EQUITY SHAREHOLDERS AF TER THE 31ST DAY OF MARCH, 1964, AND BEFORE THE 1ST DAY OF APRI L, 1965 ; (II) ANY ADVANCE OR LOAN MADE TO A SHAREHOLDER OR T HE SAID CONCERN BY A COMPANY IN THE ORDINARY COURSE OF ITS BUSINESS, WHERE THE LENDING OF MONEY IS A SUBSTANTIAL PART OF THE BUSINESS OF THE COMPANY ; (III) ANY DIVIDEND PAID BY A COMPANY WHICH IS SET O FF BY THE COMPANY AGAINST THE WHOLE OR ANY PART OF ANY SUM PR EVIOUSLY PAID BY IT AND TREATED AS A DIVIDEND WITHIN THE MEA NING OF SUB-CLAUSE (E), TO THE EXTENT TO WHICH IT IS SO SET OFF ; 5 I.T.A. NO.3038/CHNY/18 (IV) ANY PAYMENT MADE BY A COMPANY ON PURCHASE OF I TS OWN SHARES FROM A SHAREHOLDER IN ACCORDANCE WITH THE PR OVISIONS OF SECTION 77A OF THE COMPANIES ACT, 1956 (1 OF 1956) ; (V) ANY DISTRIBUTION OF SHARES PURSUANT TO A DEMERG ER BY THE RESULTING COMPANY TO THE SHAREHOLDERS OF THE DEMERG ED COMPANY (WHETHER OR NOT THERE IS A REDUCTION OF CAP ITAL IN THE DEMERGED COMPANY). 5. AS PER SECTION 2(22)(E) OF THE ACT AS IT STANDS TODAY, IF A SHAREHOLDER HAVING SUBSTANTIAL INTEREST IN THE COMP ANY, RECEIVED MONEY OR THE COMPANY PAID MONEY TO A CONCERN IN WHI CH THE SHAREHOLDER IS INTERESTED OR THE MONEY WAS PAID FOR THE BENEFIT OF SHAREHOLDER, THEN IT HAS TO BE DEEMED TO BE DIVIDEN D. IN THIS CASE, THE LD.COUNSEL COULD NOT CLARIFY WHO ARE THE SHAREH OLDERS IN THE ASSESSEE-COMPANY AND IN THE LENDER COMPANY. IN VIE W OF THE ABOVE, THIS TRIBUNAL IS OF THE CONSIDERED OPINION T HAT THE MATTER NEEDS TO BE RECONSIDERED BY THE ASSESSING OFFICER. ACCORDINGLY, ORDERS OF BOTH THE AUTHORITIES BELOW ARE SET ASIDE AND THE ENTIRE ISSUE IS REMITTED BACK TO THE FILE OF THE ASSESSING OFFICER. THE ASSESSING OFFICER SHALL BRING ON RECORD THE ENTIRE SHAREHOLDING PATTERN OF THE ASSESSEE-COMPANY AS WELL AS THE LEND ER COMPANY AND THEREAFTER DECIDE THE ISSUE AFTER TAKING INTO C ONSIDERATION THE LANGUAGE EMPLOYED BY THE PARLIAMENT IN SECTION 2(22 )(E) OF THE ACT. 6 I.T.A. NO.3038/CHNY/18 6. WITH THE ABOVE OBSERVATION, THE APPEAL FILED BY THE ASSESSEE STANDS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE COURT ON 29 TH MAY, 2019 AT CHENNAI. SD/- SD/- (. !' ) ( . . . ) (A. MOHAN ALANKAMONY) (N.R.S. GANESA N) $ / ACCOUNTANT MEMBER /JUDICIAL MEMBER /CHENNAI, 4 /DATED, THE 29 TH MAY, 2019. KRI. . ,156 76(1 /COPY TO: 1. *+ /APPELLANT 2. ,-*+ /RESPONDENT 3. 0 81 () /CIT(A)-16, CHENNAI 4. PRINCIPAL CIT-6, CHENNAI-34 5. 69 ,1 /DR 6. :' ; /GF.
